Contingency fees can be a real rip off

The lawyer's contingency fee is based on a percentage of the amount awarded in the case. If you lose the case, the lawyer does not get a fee, but you will still have to pay expenses. Contingency fee percentages vary. Anywhere from 15% to 33% is common. Some lawyers offer a sliding scale based on how far along the case has progressed before it is settled. Courts may set a limit on the amount of a contingency fee a lawyer can receive. This type of fee arrangement may be charged in personal injury cases, property damage cases, or other cases where a large amount of money is involved. Lawyers may also be prohibited from making contingency fee arrangements in certain kinds of cases such as criminal and child custody matters.

A lawyer who offers to take your case on a contingency fee in which he or she gets paid only if you win isn't necessarily proposing a good deal. If it's clear that you were seriously injured and another person who is covered by insurance was at fault, the attorney may be proposing to take a hefty cut (usually 15% to 20%) of a sure thing. This is especially true if the attorney figures he or she can settle the case by making a few phone calls. Keep in mind that, from your point of view, a contingency fee can be a good deal when the attorney is taking a big risk but it can be a big rip-off when little risk is involved.

The British Columbia Court of Appeal cut a contingency fee of nearly $200 thousand dollars down to $120 thousand dollars because the original bill did not sufficiently reflect all relevant factors, including time spent on the case. The original amount of the fee represented 20% of the amount recovered on behalf of Mariah Ralston who suffered catastrophic injuries in a car accident on August 1, 1993.

The lawyer, Mary Noreen Fus, a sole practitioner in Kamloops, B.C., estimated that she had spent approximately 150 hours on the file over a period of approximately 11 years that she acted just prior to the settlement of the case in court. She claimed that her hourly rate had been $250. When you multiply that rate with 150 hours, you get $37,000. Because her client agreed to accept a contingency arrangement with her, the client was bound by the terms and hence, she had to pay an extra $74,880 for the services of her lawyer on top of the $37,000 for a total of $118,880 plus disbursements.

The fees were paid out to lawyers for a recently settled case involving compensation for victims of residential schools in Canada --- where many aboriginal children and youth were mistreated, abused and often neglected, was enormous. The fees to the lawyers amounts to about $80 million. One firm from Saskatchewan, The Merchant Law Group, will receive about 1/2 of that …..$40,000,000.00. That firm has 50 lawyers. That's $800,000.00 on average per lawyer. No doubt, the junior lawyers will see very little, if any of that money, and the partners will enjoy much higher yearly bonuses this year. The firm stated that many of their lawyers had gone without pay for extended periods, and that they had invested over $2 million of their own monies into the class action case. They represented about 9,000 clients in the class action.

The settlement meant that any living former students would get a lump sum of $10,000 and then $3,000 for each year spent in the schools. That amounts an estimated average of about $30,000.00 for each of those Indian students still alive. It is estimated there are 80,000 people alive today who attended Indian residential schools, according to Statistics Canada. The total payout to each living student is about as much a secretary makes in one year. The average age of the former students is 60, but many are sick and living in poverty. This is compensation for many years of actual physical, sexual and mental abuse, plus years of post-abuse mental anguish and all they get is $30,000. They would have got more if the law firms didn’t get such a huge cut of the total settlement that the government was paying.

The lawyers worked hard, I am sure, but they didn't get for the claimants what they asked for. On the other hand, the lawyers in that firm chose to take a risk on 9,000 clients and to put in a lot of time. But, in my opinion, the risk they took and the time they spent on the cases does not reflect the 40 million dollars they received as their cut of the total settlement.

As many as 22,000 Canadians suffered from hepatitis C when the Canadian Red Cross accepted blood donations from donors who were suffering from hepatitis C. The disease was passed onto patients in hospitals requiring surgery. On June 1, 1998, Ms. Alexa McDonough (Halifax, NDP) when speaking in the Canadian House of Commons said in part; “Mr. Speaker, while the health minister stalls and blunders on hepatitis C compensation, lawyers line up to feed on victims' insecurities. In Manitoba we now have evidence that victims are being coaxed to give up 25% of their compensation in exchange for legal representation. Can the minister not see that his stalling is driving victims into the arms of lawyers only too willing to take a hefty cut out of their compensation?”

I don’t have to convince my readers that some lawyers are real sharks swimming in the ocean of grief trying to and in many cases succeeding in putting the bite on their clients.

The Medical Injury Compensation Reform Act of 1975 in California permits lawyers in that state to charge contingency fees in which plaintiff attorneys may recover 40% of the first $50,000 recovered, 33 and 1/3% of the next $50,000, 25% of the next $500,000, and 15% of an excess over $600,000. These limits apply whether the recovery is by settlement, judgment, or arbitration. If a victim of a medical malpractice suit is awarded one million dollars, the lawyer would receive $20,000 on the first $50,000 and then get $16,650 on the second $50,000 and then get $125,000 on the next $500,000 and finally get $75,000 on the remaining $500,000. The total amount that the lawyer would get for his services on a contingency basis where the award for his client would be one million dollars, would be $236,650. The lawyer's fee would be approximately a little over 23% of the award, which is almost a quarter of the award.

Many medical malpractice cases never go to court and are settled in a few months if the negligence on the part of doctor is obvious and the results to the patient is horrendous such as cutting off the wrong leg or blinding the patient etc. For a lawyer to collect almost a quarter of a million dollars for perhaps no more than 100 hours of work is outrageous. Of course, some lawyers pad their bills and it may appear as if he did 200 hours of work when he only did 100 hours of work. I know one lawyer in Toronto who padded his bills to an extent that the authorities concluded that he had to work as much as 24 hours a day month after month. He was disbarred naturally.

To sum up, let me tell you this very funny joke about a lawyer who over-billed his client.

A lawyer died and arrived at the pearly gates. To his dismay, there were thousands of people ahead of him in line to see St. Peter. However, to his surprise, St. Peter left his desk at the gate and came down the long line to where the lawyer was standing. St. Peter greeted him warmly. Then St. Peter and one of his assistants took the lawyer by the hands and guided him up to the front of the line and placed him into a comfortable chair by his desk. The lawyer said, "I don't mind all this attention, but what makes me so special?" St. Peter replied, "Well, I've added up all the hours for which you billed your clients, and by my calculation you must be about 293 years old!"

Unfortunately, a contingency fee is no joke when lawyers charge so much money for so little work. This is not to say that some of them don’t do a lot of work on their cases. They do. But I doubt that all that many of them really do so much work that they are entitled to a large cut of the awards. If a lawyer offers to work on a contingency basis for 15% of the award, take the deal without question. If he asks for 20% of the award, get a second opinion. If he asks for 25% of the award, search for another lawyer.